WTO Members Review Preferences Granted to LDCs’ Service Suppliers

·         Enhancing LDCs' participation in services trade

·         Improving transparency

·         Concerns about cybersecurity measures

·         Access to markets for foreigners

·         Workshop on financial technology

A dedicated session of the WTO Services Council, held on 29-30 October 2019, reviewed how WTO members are making use of the Services Waiver that allows them to grant more favourable treatment to service suppliers from least-developed countries (LDCs). Members also discussed transparency issues and cybersecurity measures in a regular meeting of the Services Council on 30 October.

Enhancing LDCs' participation in services trade

The dedicated session on the WTO Services Waiver consisted of a workshop and a formal meeting of the Council for Trade in Services. The workshop provided an opportunity to “focus our attention on the task of better integrating LDCs into international services trade” and of “making the trading system more inclusive”, Director-General Roberto Azevêdo said in his opening remarks on 29 October. A total of 36 WTO members are classified as LDCs.

The workshop reviewed ways of increasing LDCs' services exports, including through maximizing the use of the preferences available, and the challenges lying ahead.

The participants noted that LDCs account for 1% of world services and only 0.3% of world services exports. LDCs' exports are expanding rapidly — 11% per year on average — but from a low base. Bangladesh is the leading LDC services exporter, followed by Cambodia and Myanmar, and tourism is the LDCs' most traded services sector. To date, 51 WTO members — both developed and developing countries — have notified preferences under the Services Waiver. These members together account for 86% of global GDP and 86% of global trade.

A review of the waiver was mandated by the 2015 Nairobi Decision. A services waiver was first established in 2011 allowing WTO members to grant more favourable treatment to LDC service suppliers. The Nairobi Decision extended the waiver until 31 December 2030. The purpose of the waiver is to enhance the participation of the world's poorest countries in world trade.

One theme emerging from the dedicated session of the Services Council was the need for more detailed trade data and for reporting of bilateral trade flows. The European Union was cited as one of the few members to report on the evolution of its imports of LDC services. It was noted that Bangladesh was one of the few LDCs to publish data about its services exports. The EU was reported as being the top destination for Bangladesh's services exports.

Lesotho said that services trade is key for LDCs' economic expansion, including for diversification, job creation and industrial development. It called for increased awareness about LDC exports among consumers in preference-granting economies. Senegal announced the creation of a national dedicated working group to monitor the progress made on implementing the waiver and said the conclusions will be shared shortly.

The LDCs also drew attention to the potentially restrictive effect regulations can have on market access for LDC service suppliers, including raising the costs of trade. They called on preference-granting members to tailor their preferences to the collective request tabled by the LDCs in 2014, which calls for, among other things, to end requirements for the recognition of qualifications and market access restrictions, including residence obligation for professionals from LDCs. Strategies on strengthening national capacities for service supply should be tailor-made to respond to the specific capacity constraints LDCs are facing, the group said.

In addition, an overview of the recent improvements to the services-related statistics databases was presented, including the TiVA database — developed by the Organisation for Economic Cooperation and Development (OECD) and the WTO — that measures trade in value added (TiVA) terms, and the Trade in Services database by mode of supply, which measures services trade by sector.

The dedicated session highlighted the need for efforts from national agencies in charge of statistics for financial resources to collect and compile data and to promote multi-level cooperation. The need for specific technical assistance for LDCs was also emphasized. Improving data collection at the national, regional and international levels will be essential to better capture the progress made on implementing the Services Waiver.

Another issue highlighted was the regional disparity among LDCs. For example, tourism services are concentrated mainly in Asian countries, and while the share of LDCs' services exports is growing in Asia, it has been declining in Africa since 2005.

The preference-granting members shared recent initiatives and practices to translate the waiver into concrete market share for LDCs. These include easing the granting of visas for service suppliers seeking to access foreign markets, assisting LDCs in building a robust and sustainable tourism sector by helping to build roads and hotels and enhancing presence on the Internet, organizing traineeships and organizing targeted technical assistance activities. It was also stressed that the waiver should complement other efforts.

Several LDC service suppliers presented their success stories, the challenges they face and made suggestions on how to facilitate their further integration into the global trading system. It was said that certification remains a key challenge for service suppliers from LDCs, especially given its close link with consumer confidence.

LDCs called on members to grant additional preferences and to reduce regulatory barriers.

Improving transparency

In a meeting of the Council for Trade in Services on 30 October, WTO members discussed transparency and notification requirements for services-related measures following a communication sponsored by several developing countries. All members that intervened said that they shared the proponents' objective to improve transparency, although many noted the capacity constraints faced by developing countries and LDCs in complying with notification requirements, including internal coordination challenges. Several indicated that they were ready to engage in a conversation on how the transparency of services trade measures could be improved.

Concerns about cybersecurity measures

Japan and the United States reiterated concerns with cybersecurity measures from Viet Nam and China, warning against their potentially restrictive impact on foreign enterprises and inconsistency with the obligations of the WTO's General Agreement on Trade in Services (GATS). These concerns were shared by Australia, Canada, the EU, New Zealand and Chinese Taipei.

While strongly supportive of efforts to enhance cybersecurity and understanding the need to ensure compliance with other domestic laws, these members expressed concerns with measures that require local storage of information and/or limitations to its transfer abroad. The members called on China and Viet Nam to adopt less trade-restrictive measures to pursue these legitimate goals. The US referred in particular to a workshop organised by the Asia Pacific Economic Cooperation (APEC) on cybersecurity standards, demonstrating how the alignment of these standards provided an opportunity to increase trade and strengthen overall cybersecurity in the region.

China and Viet Nam were requested to take comments from all stakeholders into consideration before implementing draft measures. While their efforts to enhance transparency and engage with interested members were acknowledged, the lack of clarity and concerns about certain requirements were cited.

China announced that its encryption law, which will come into force next year, reflects the comments received from different stakeholders during the consultation phase with a view to keeping a balance between guaranteeing encryption security and minimizing the burden for business. It reiterated its availability to discuss this matter.

Viet Nam explained that the legislative process is transparent and takes into consideration comments from all stakeholders.

Access to markets for foreigners

Under discussion at a meeting of the Committee on Specific Commitments on 28 October was a proposal from the Kyrgyz Republic about how members could improve their commitments related to the temporary movement of individuals, also known as “mode 4”. The proposal was first discussed earlier in 2019. The Kyrgyz Republic reiterated that many members' mode 4 entries are ambiguous and opaque, leading to legal uncertainty and thus undermining the value of specific commitments. Some common problems relate to economic needs tests — (a test that conditions market access upon the fulfilment of certain economic criteria, also known as “ENT”) and the categories of individuals concerned, the delegation said.

Many members that spoke agreed with the need to have clearer and more transparent mode 4 commitments, particularly with regards to ENTs and defining categories of individuals. However, several members said that some of the issues raised, including setting common definitions for categories of individuals, would pose a challenge. The chairperson, Mr Tamas Vattai from Hungary, said he would continue consultations with members on how the Committee should move forward under this agenda item.

Workshop on financial technology

At a meeting of the Committee on Trade in Financial Services (CTFS) held on 28 October, WTO members broadly supported a proposal by China to hold a thematic seminar on “FinTech: Trade, Financial Inclusion and Development” The Chairperson, Mr Ding Li of China, will hold consultations with all interested members to shape the seminar's programme. The CTFS is one of the subsidiary bodies of the Services Council.